Alice McGuire’s four-woman IR team is far more interested in getting Compaq into portfolios than debating the battle of the sexes. Although both technology and finance are often heavily male-dominated, she reports that ‘CFO Earl Mason has recently appointed three new women vice presidents to Compaq’s finance team. There’s no sense of a glass ceiling at all.’
And for the last five years, there has been little hint of a ceiling for Compaq’s soaring stock either. At the time of writing it was over $130, commensurate with sales of $18 bn, and about to be the subject of a five-for-two split.
However it was not always so. In 1991, Houston-based Compaq had the mother of all computer crashes, forcing a restructure which left McGuire flying the IR department solo. ‘We had our first loss, just one quarter, in our ten year history, and it was really an occasion to regroup. But from October 1991 until we announced the new products in July 1992, our shares were under siege. It was probably some of the most difficult times for investor relations.’
‘We were uncompetitive, priced too high,’ she diagnoses. ‘We had our eye on IBM, but we were not watching the upstarts. Probably 85 percent of our business was with Fortune 500 companies, and our product was not readily available. When Eckhard Pfeiffer became our CEO in 1991, his vision really turned the company around.’
Meltdown
Avoiding an Apple-style core meltdown when Compaq missed a quarter meant reassuring investors they wouldn’t be left with the pips. ‘The first thing was not to run away or hide, but to take it head on,’ she explains, ‘We had an analysts’ meeting already scheduled and so we went ahead. We had all the management there to explain what we’d been doing wrong and how we were going to fix it. There were shareholders who believed that, and there were shareholders who said I’ll see you when you get there.’
Afterwards, ‘I worked hard at keeping relationships. It was important to know whether analysts had a sell or a hold on the stock and to make sure our major shareholders were kept apprised of our report card.’ Now, the most frequent question Compaq gets from investors is ‘What are you going to do with all that cash?’ Since the company has been debt free, its cash reserves have swelled to over $5 bn.
Tempered in the IR of that bygone crisis, McGuire has had time to think about the job, as well as do it. Above all, she recognizes IR cannot burn in a corporate vacuum, but is directly related to corporate performance. ‘IR is a combination of financial and marketing expertise, intended to create value for the corporation and the shareholder,’ she says. ‘It has to start on the inside, in the corporation. We have to be knowledgeable, to understand the corporation’s strategy, and that’s what allows us to set a stage for management to be able to communicate. We have to create a really proactive plan to tell that story, to communicate to the market, and we do that by creating an open dialogue, building credibility with the Street and the shareholders through consistent returns.’
Can-Do
A regular reader of this magazine, McGuire remarks on a recent article about the ten thousand definitions of ‘shareholder value’. She offers an extra one. ‘Shareholder value is more than earnings per share. You increase shareholder value by increasing return on invested capital (ROIC) and economic value added (EVA). The strongest way we create value is through our financial strength and the tremendously good business that provides earnings and cash. Stock price is a major part of it but ROIC measures not just our earnings but how well we manage our working and fixed capital. Share price is directly related to the ability to manage our capital effectively. We do that through people, since we have very much of a can-do culture, very change-oriented.’
McGuire’s part of the can-do culture, the IR department, reports directly to the CFO and has expanded to four since the dark days of 1991. Lysa Bryant is program manager for all IR events and financial presentations. Tien Le, research analyst and Web master for both the internal and external Web sites, keeps the department up-to-date with product technology and market share information. Laura Trotter, the newest addition to the team, keeps all the IR databases up-to-date and updates press releases on the Web (www.compaq.com/corporate/ir). All of them answer calls when they come.
IR needs lateral thinking, McGuire maintains. ‘There’s no hard and fast rule, but I’d pay a lot more for a bright intuitive go-getter than someone with an MBA who’s clueless. We’re a very tenacious group and we leverage a lot from all the other teams around the corporation,’ she continues. ‘That cooperation is probably the saving grace, especially when you’re as large and as active a company as we are.’ An example of such cooperation is a morning conference call with corporate communications staff to discuss the markets and other news.
Things can really buzz around Compaq headquarters. Recently the IR team was juggling a cash tender offer from Microcom, a merger offer out for Tandem, and a stock split. ‘We’re doing an awful lot of things and it would be very difficult with a team of only four if we didn’t have that cooperation. Of course, we also work long hours!’
Computer Aficionado
McGuire’s first introduction to IR was when she joined Compaq in 1989 as an assistant in the IR area. ‘I came to Compaq because I’m a computer aficionado. I love what a computer can do for you. As I got in the door, I knew instinctively that this was very much me. As I learned more and more about the financial side of the business, and about the market, I realized IR needs two fundamentals: intuition and common sense.’
Perhaps the two most frequent words in McGuire’s disquisition are ‘people’ and ‘relationship.’ She does not use them lightly. ‘I truly thrive on people’ she says. ‘For IR you need to be a people person. You need to be able to cultivate very strong relationships, not just in the financial community, but also internally.’
In dealing with investors, this translates as ‘putting ourselves in the other person’s shoes. When you get that call from someone who is absolutely hysterical because they don’t have information, always remember what it’s like on the other side. No matter how big or self-important you think you and your corporation are, you should always try to think the way the other side thinks.’
Accordingly, the department is happy to take calls from individuals, although ‘some call too frequently.’ She admits to prioritization at stressful times, ‘but we return all those calls.’ More importantly, with Compaq’s 73 percent institutional holding, she claims ‘a very strong relationship with the Street, and a tremendous number of shareholders and analysts who come to see us. We make very frequent trips to both coasts as well as running on extremely proactive targeting program, mostly using Georgeson & Co in the US.’
‘What we look for are growth investors – growth-at-a-reasonable-price investors, and we also have value players. So obviously what we’d like to do is to stay in that middle range.’ However, despite their likely role in the 1991 traumata, ‘when you look at technology stocks there are a lot of momentum players and very large funds in the Intels, Microsofts and Compaqs of the world, and they do bring a lot of liquidity to the table.’
Traffic with the Street is not one-way of course. The IR department maintains a database from which it can disseminate reports on the company, on its competitors, about anyone else they’re interested in, or on any of the market indices. And it is put to good use. ‘This management team is really clued in – for example our chairman was a former Wall Street analyst himself, and he is very involved with how we communicate to the financial community,’ McGuire explains.
McGuire confesses that she has confronted analysts and asked firmly, albeit as a courtesy, for advance notice of a change of rating. ‘But I’d never keep an analyst away from us, no matter what their rating or attitude. I look on negative views as a challenge. I work harder with those people.’ However, she is firm that they should approach the firm through her department, or the CEO and CFO.
And they have ample opportunity to establish those dialogues. Compaq sets up teleconferences with the financial community – usually on an ad hoc basis – along with around 40 visits a quarter to the head office. Some of the major brokerages bring in up to 20-30 investors. ‘We feel strongly about providing the financial community with accessibility. CFO Earl Mason makes himself very available,’ McGuire says. Some analysts confess they’d like to see more of Pfeiffer as well, however he is concentrated on sales and business partnerships areas.
Moving Mountains
Where the mountain won’t come to Houston, Houston has now taken to going to the mountain. Compaq is expanding its targeting internationally using Kuhn Partners of Belgium. Despite over 50 percent overseas sales, McGuire suspects that international investments are presently a single digit proportion. ‘But it seems a shame not to tap into that synergy with investors there.’
To attract overseas investor interest, Compaq now make three or four trips a year to Europe. They have also begun trips to Asia as well, with help from GA Kraut & Co. Even in Japan, the heartland of electronic competition, she reports ‘people had been hungry for us to make those trips.’ This year they made their first successful trip to Canada.
‘When we go abroad, we involve our country managers and our finance director in those meetings. Often those potential shareholders are also potential clients for our products.’ Currently, however, the company is only listed on the NYSE (CPQ) with no immediate plans to secure overseas listings.
Employees are another target, and a window on staff PCs shows how the stock is trading. ‘We’re making a big push with our corporate intranet, to provide our employees with more details about the company, its growth and how the world views us financially.’ Because traditionally it has been a growth company, Compaq does not have a dividend reinvestment plan of the kind favored by many individual investors – it has never paid a dividend.
Still exuding job satisfaction, McGuire concludes with a little bit of praise to the joys of the profession. ‘What I love about investor relations is that there’s no more fortuitous place to know and understand the company. Communicating to the world what the company’s done and what it’s going to do in the future – there’s no book that can put you through that. That’s one of the things my team enjoys: being in the thick, and being extremely holistic so you can get the big picture.’
What the Analysts Say
Charley Wolff
Credit Suisse First Boston
Analysts clearly regard Compaq’s IR as a high-end model. ‘There’s nobody better than Compaq,’ says Wolff. ‘Alice is being compared with other people who do a great job as well. Even so, she’s been increasingly effective in providing information about the company, or arranging meetings with the company when we want to go to Houston. She presents an accurate profile of the company while being very professional in her job.’
‘When it comes to the provision of information, she has done just a wonderful job,’ he continues. ‘And in helping us build a sales earnings model, she’s been excellent. At times when the company has delivered a confusing message to the marketplace, such as this spring with their build-to-order plans, she was able to straighten those out. She’s frequently corrected poor assumptions I’ve had. All told, I would say that she’s done just an excellent job, and has done even better overall since their new CFO, Earl Mason, came on board. That has been a change for the better for the analyst community. He has given her more responsibility, and she’s able to convey more information, more effectively, which makes our job easier.’
Andy Neff
Bear Stearns
Neff joins the enthusiastic chorus: ‘One thing that’s distinctive is the sense of direction that Compaq provides, putting into perspective all the developments and the corporate strategy,’ he says. ‘The PC industry is very volatile, with new things going on all the time, and when you try to understand what’s going on, they do a very good job of that.’
Reminiscing about the 1991 events, Neff recalls, ‘McGuire was pretty good under fire. She handled the turnaround really well, with one of the most visible companies in the world. It was a tough thing to do. One of the important qualities is to be responsive when things happen quickly and you need to be able to get information in front of people to let them know what’s going on. They do a good job.’
Rick Shutte
Goldman Sachs
Shutte also does not stint on hyperbole when talking about Alice on Wall Street. ‘It would be tough to find anyone who doesn’t like her or the job she does. Personally and professionally she does a wonderful job. She’s proactive, responsive, knowledgeable, and if she doesn’t have the answer off the top of her head, she goes to find it. She does a great job across the board, fairly, consistently and responsively. She’s very proactive in clarifying and disseminating information, so there are no surprises. She understands the business, and understands that communication with the Street is very important. She lets you know what’s important and what isn’t, keeps an open dialogue, and if it’s proprietary information that she doesn’t want to share, she’s consistent about that as well.’
In short, Shutte concludes, ‘McGuire is a great communication link between Compaq senior management and the Street – about the best in the business.’
